EDITED BY DLA PIPER RUDNICK GRAY CARY

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1 JOURNAL OF INTERNET LAW VOLUME 10 NUMBER 11 MAY 2007 EDITED BY DLA PIPER RUDNICK GRAY CARY BitTorrent, Grokster, and Why Entertainment and Internet Lawyers Need to Prepare for the Fair Use Argument for Downloading TV Shows By Charles B. Vincent If a man has good corn, or wood, or boards, or pigs, to sell, or can make better chairs or knives, crucibles, or church organs, than anybody else, you will find a broad, hard-beaten road to his house, though it be in the woods. Ralph Waldo Emerson, The Emerson quote has been paraphrased and morphed over time into its better-known pithier counterpart: Build a better mousetrap, and the world will beat a path to your door. 2 Modern computer technology has not diminished the applicability of Emerson s simple observation. In the music industry, consumers initially purchased vinyl LPs, progressed toward cassettes, and recently turned to compact discs before the digital sound file emerged as the modern way of listening to music. Likewise, many watched television by adjusting their antennas long before anyone began paying for a cable or Charles B. Vincent received a JD from Widener University School of Law in Mr. Vincent externed as the Wolcott Fellow for Vice Chancellor Donald F. Parsons, Jr., in the Delaware Court of Chancery in and will serve as a clerk for Justice Henry dupont Ridgely in the Delaware Supreme Court in While at Widener, Mr. Vincent was one of the Articles Editors for Volume 32 of The Delaware Journal of Corporate Law. The author gratefully acknowledges the assistance of Amy Yeung, Thomas Uebler, and Josh Meyeroff for their helpful comments. satellite signal. The ability to watch digital versions of television shows and movies on one s computer is merely the next step on the evolutionary visual media ladder. 3 As the means to obtain these files through software or online distributors continue to improve in their efficiency and availability, the copyright holders of these works will IN THIS ISSUE Continued on page 7 BITTORRENT, GROKSTER, AND WHY ENTERTAINMENT AND INTERNET LAWYERS NEED TO PREPARE FOR THE FAIR USE ARGUMENT FOR DOWNLOADING TV SHOWS By Charles B. Vincent HOW WELL DO YOU KNOW YOUR INTERNET MARKETING PARTNERS? By Tom Hughes INTERNET LAW IN THE COURTS By Evan Brown DEVELOPMENTS IN INTERNET LAW EUROPE By Patrick Van Eecke and Maarten Truyens Electronic copy available at:

2 May 2007 JOURNAL OF INTERNET LAW BitTorrent, Grokster, and Why Entertainment and Internet Lawyers Need to Prepare for the Fair Use Argument for Downloading TV Shows Continued from page 1 continue enforcing their copyright through litigation. For the copyright holders of television shows, however, the path to protecting the creative work may not be as wellbeaten as one may hope. Downloading media through the Internet is now commonplace. 4 Due to the rapid development of technological infrastructure, however, torrent downloading technology has abruptly decreased the time required for one to obtain large media files. As a result, downloading such files has gone from impractical to commonplace, and television shows [now] represent the fastest-growing type of files downloaded online. 5 For example, in 2005, one television fan admitted that it took him seven hours to download an hour-long episode of a recent season finale that he had missed using his high-speed Internet connection and the latest file-sharing software. 6 In 2006, Apple s itunes Web site stated that a comparable 45-minute show would take minutes to download with a high-speed Internet connection. 7 Other Web sites simply host the video and stream the content in sections, allowing the user to watch it without downloading, which would yield practically instantaneous viewing gratification. 8 As the technology continues to improve, copyright holders for these shows should be concerned about rising levels of potential infringement. One outcome, however, is clear: People now consume digital American television in mass quantities. 9 While the original peer-to-peer downloading programs, such as the all-familiar Napster, were found to have encouraged copyright infringement by providing unfettered access to digital music files, media downloads now present a novel question as to whether the newer peer-to-peer networks (such as BitTorrent) or other unofficial content providers or resources providing access to digital video files face the same infringing concerns. The surface answer, of course, is yes, but the distribution of television shows, and particularly broadcast television shows, 10 raises legal issues that can and will be distinguishable from those raised in the music piracy cases. This article purposely leaves open the question of whether the same analysis could apply to downloaded cable and premium channel television shows, such as original programming from MTV or HBO, as well as syndicated shows, which typically are aired originally on broadcast television and now appear on other broadcast or cable channels. Although the question of fair use may hinge on whether the service is paid for by the end user and may be mooted by the fact that a homeowner has bundled his or her high-speed internet connection and cable service, the fact that cable and premium shows are not free in the sense that the user has to pay for the subscription may alter the fair use analysis presented. Where appropriate, however, this article will distinguish this point. This article presumes that anybody with access to a high-speed Internet connection can obtain, with minimal effort, the software necessary to download large files, such as copies of television shows or movies, which can be watched and stored on one s computer. The next section of this article provides a brief overview of torrent technology, which is the current and most prolific downloading method used to obtain large files today. Because the Supreme Court s 2005 decision in Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd. 11 has solidified certain obligations on behalf of these types of distributors in the context of confronting the digital music piracy problem, this article explores these obligations and its implications on the purveyors of torrent technology. The next part of this article assesses the fair use doctrine as it may apply to those programs that facilitate distribution of digital copies of broadcast television show (referred to as distributors) and the end users 12 who download them. Because of the nature of broadcast television, litigation against the peer-to-peer downloading programs may be successful for the reasons explained, whereas litigation against the end users may be distinguishable from the programs and prove to become futile. Some practical considerations and litigation strategies are explored in the article, and it concludes with the hope that these copyright holders will use the online television consumer base to develop a more marketable and profitable product. HOW INTERNET DOWNLOADING MAY DISPLACE THE RERUN At the beginning of this century, anyone with a highspeed Internet connection and a computer with a large hard drive could find and download almost any song that they wanted for free. Most did so through programs like Napster without hesitation based on casuistic entitlement reasons or the belief that everyone was doing it. 13 Just five years later, a similar downloading mentality has entered the television show market. 14 Before exploring whether downloading television shows garners the same types of infringement considerations, a brief summary of modern downloading is necessary. For purposes of basic foundation only, this article focuses on the principal downloading programs that evolved beginning in the early 2000s. 15 Napster was the first widely used peer-to-peer networking system on the Internet. 16 Napster allowed any user of its program to connect to its centralized server, which regularly indexed the combined shared files of any other 7 Electronic copy available at:

3 JOURNAL OF INTERNET LAW May 2007 user then connected to its system. 17 Thus, if a user, or peer, wanted to download a file, Napster s search engine would provide a link to another user, or peer, who had that file. Its software then facilitated the peer-to-peer download. Ultimately, Napster s centralized server, coupled with its refusal to take sufficient remedial measures to remove access to infringing materials, proved its undoing. 18 To emulate Napster s success without these same crippling liability concerns, the next generation of peer-to-peer downloading applications modified the way in which their users could obtain the files that they sought. 19 Grokster was one such successor program. Unlike Napster s method of indexing its combined user database to promote easy searching, Grokster s search engine simply passed the request to other connected users. 20 Upon finding a peer with the desired file, Grokster s decentralized program thereafter allowed the end user to download the file from that peer and search the rest of that peer s shared directory. The absence of keeping a list of infringing files and the inability to bar illegal file sharing between users precluded Grokster, at first, from the copyright infringement aspects that imputed liability to Napster. 21 How the Supreme Court combated this tacit facilitation of piracy will be discussed in the next section, but competitive peer-to-peer downloading technology programs continued to adapt as copyright challenges were being brought against Grokster. Taking Grokster s decentralized peer-to-peer network idea to a completely different level, Bram Cohen in 2001 designed BitTorrent, a content distributing program where an end user could download parts of the same file (complete or otherwise) from multiple users simultaneously. 22 Rather than download the actual file, as a user would do with Grokster or Napster, BitTorrent s users download a torrent, or a small file which contains metadata about the files to be shared, and about the tracker, the computer that coordinates the file distribution. 23 The torrent provides the BitTorrent software with the information needed to search out and download the requested file to that user s computer. 24 While BitTorrent has its own search engine for torrents, torrents can also be found by searching on other third-party search engines. 25 Although the process of downloading through torrent technology is much more complex and, in detail, unnecessary to explain for purposes of this article, the torrent essentially permits a user to download sought-after files from any user who has any part of those files, regardless of completeness. 26 In other words, a BitTorrent end user would not be downloading the entire file from one peer like he or she would from using the aforementioned Napster and Grokster programs; instead, the end user would simply download from any and all users who have any piece of the file (or program). Simultaneous to the end user s downloading of his file, other end users searching for the same file or files will automatically download the incomplete parts obtained from that user s computer; and this entire tit-for-tat process helps to maximize uploading and downloading efficiency. 27 Downloading speed also becomes a function of how many users have the file or its component parts on their computers: The more people who share, the faster the download. 28 The popularity of Cohen s program, as one reporter puts it, has transform[ed] the Internet into the world s largest TiVo. 29 By means of an example for clarity, assume first that the file to which the end user (A) seeks has 1,000 parts comprising the whole. If this file were to be downloaded using Napster s or Grokster s peer-to-peer program, A would download each of the thousand parts in order from a single peer (B) sharing it. The speed to which A could get the file would depend on the bandwidth available from A s and B s Internet connections. 30 Trying to obtain this same file using torrent technology allows A to download each of the 1,000 parts in their order of availability from any and all users sharing the file, which could number in the thousands or more. 31 If A wanted to get a file and user B had 70 percent downloaded, user C had 80 percent, and user D had 100 percent, A s computer would download from both B, C, and D simultaneously. Any part of the file that A obtains that one of the other users does not already have will be uploaded from A s computer to that computer while A is downloading. This simultaneous data exchange permits large quantities of data to be transferred at once, at higher speeds, using less bandwidth and arriving with fewer errors than was possible under programs like Napster or Grokster. 32 Files that could take hours to download using the traditional methods of legitimate programs like itunes may only take minutes over BitTorrent depending on the popularity of the file. 33 This technology has been adapted by several major software companies and some movie and entertainment studios as the next generation protocol for moving data around the Web. 34 The faster download speeds and popularity of torrent technology have transformed file downloading from smaller digital music files to larger video files such as television shows. Due to this type of programming transfer, BitTorrent and similar programs face similar problems with the misuse of torrent technology. At the very least, the ease of data exchange appears to facilitate faster piracy of much larger files with Napster-type afterthought of legal consequences. Further, torrent technology introduces yet another caveat in the copyright infringement jurisprudence in that the end users also become distributors by virtue of how the data is exchanged. Taking the copyright lessons developed by Napster and Grokster, however, companies like BitTorrent are taking affirmative steps to reduce the transfer of unlicensed media and other infringing files. To combat piracy through torrent technology on its site, 8

4 May 2007 JOURNAL OF INTERNET LAW BitTorrent, for example, has taken affirmative steps to remove links directing its users to torrents of unlicensed copyrighted materials. 35 The result of BitTorrent s efforts to curb piracy has produced lucrative benefits; over the past couple years, BitTorrent has announced partnership with various entertainment studios to distribute copyrighted material legitimately through its service. 36 These partnerships, among other things, will work to increase the number of legitimate uses for torrent technology. As the next part of the article explains, these efforts and legitimate uses may effectively shield BitTorrent and other torrent technology programs from the same liability Napster and Grokster faced in their respective copyright litigations. ANALYSIS: GROKSTER AND ITS EFFECT ON DISTRIBUTORS OF DIGITAL MEDIA Much has been and will continue to be written on Grokster and its effect on third-party copyright liability. 37 This part briefly explains the Grokster holding, but forgoes any substantive analysis of the contributory and vicarious infringement issues in order to focus on why BitTorrent s technology and business model likely prevent it from facing what this article terms Grokster-liability. THE RISE AND FALL OF GROKSTER In 2003, copyright holders in the motion picture and music recording industries brought a copyright infringement action against various distributors of software that enabled its users to exchange digital media via a peerto-peer transfer network, including Grokster. 38 Although the district court acknowledged that the defendants may have intentionally structured their businesses in an effort to avoid secondary liability for copyright infringement, while benefiting financially from the illicit draw of their wares, it granted partial summary judgment for the defendants on issues of contributory and vicarious infringement. 39 The district court held that Grokster could not be liable for contributory infringement because it had no actual knowledge of specific acts of infringement, 40 nor could it be held liable for vicarious infringement because their software did not permit them to supervise and control the infringing conduct. 41 The Ninth Circuit affirmed, holding the defendants were not liable under either contributory copyright infringement or vicarious copyright infringement theories. 42 In reaching these conclusions, the Ninth Circuit agreed with the district court s finding that the software in question was capable of substantial or commercially significant noninfringing uses. 43 Because of the legitimate uses of the program, liability could be avoided upon the mere showing that Grokster did not have reasonable knowledge of specific infringement resulting from the use of its software, that is, actual knowledge of specific acts of copyright infringement due to the nature of the software. 44 Essentially, the Ninth Circuit shielded Grokster from contributory liability because the nature of its program prevented Grokster from actually knowing whether its users were downloading copyrighted media. To parallel, the Ninth Circuit also held that Grokster could not materially contribute to their user s infringement because of the program s decentralized search function, thereby creating a shield from vicarious liability. 45 The endorsement of willful blindness, which had otherwise been permitted to impute liability on similarly situated defendants in the Seventh Circuit in another music copyright infringement case, 46 created the necessary circuit split for a Supreme Court review. 47 Not surprisingly, the Supreme Court granted certiorari. 48 In vacating the Ninth Circuit s ruling, the Supreme Court acknowledged that the case proceeded under the practical theory of contributory or vicarious liability. 49 The Supreme Court also rephrased the threshold of liability under these circumstances: One infringes contributorily by intentionally inducing or encouraging direct infringement,... and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it. 50 The inducement rule, as explained by the Supreme Court in Grokster, adopts an actual or constructive knowledge-plus test when determining liability, 51 focusing primarily on the distributor s intent to foster or deter copyright infringement: In sum, where an article is good for nothing else but infringement, there is no legitimate public interest in its unlicensed availability, and there is no injustice in presuming or imputing an intent to infringe. 52 [W]here evidence goes beyond a product s characteristics or the knowledge that it may be put to infringing uses, and shows statements or actions directed to promoting infringement, Sony s staplearticle rule will not preclude liability. 53 [O]ne who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties. 54 [M]ere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability. Nor would ordinary acts 9

5 JOURNAL OF INTERNET LAW May 2007 incident to product distribution, such as offering customers technical support or products updates, support liability in themselves. The inducement rule, instead, premises liability on purposeful, culpable expression and conduct, and thus does nothing to compromise legitimate commerce or discourage innovation having a lawful promise. 55 The Supreme Court found compelling the plaintiffs evidence that Grokster s business model contemplated capturing Napster s former market of copyright infringers. Grokster s software also intentionally precluded Grokster administrators from discovering any specific acts of infringement. The Court also identified that Grokster s advertising profits hinged on the number of times its program ran. Finding that 90 percent of Grokster s users were operating the program for infringing purposes and that Grokster s advertising revenue was based on user activity, the Court reasoned that Grokster geared its revenue stream and thereby profited primarily from the illicit uses of its program. 56 Finding that the evidence beyond distribution shows a purpose to cause and profit from third-party acts of copyright infringement, the Supreme Court vacated the Ninth Circuit s ruling. 57 In essence, the Supreme Court rejected Grokster s willful blindness, or purposeful, culpable expression and conduct toward its pirate end user base, and opened the liability door for the copyright-holder plaintiffs. As stated at the outset of the case, one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties. 58 Not surprisingly, the concurring opinions added complexities to the underlying holding. Justice Ginsburg s concurrence explains why there remained a question of fact precluding summary judgment as far as the level of commercially significant uses inherent in Grokster s program: Liability under our jurisprudence may be predicated on actively encouraging (or inducing) infringement through specific acts (as the Court s opinion develops) or on distributing a product distributees use to infringe copyrights, if the product is not capable of substantial or commercially significant uses. 59 Because the district court had concluded that there were substantial noninfringing uses for Defendants software without finding any fair use or little beyond anecdotal evidence of noninfringing uses, Justices Ginsburg, Roberts, and Kennedy found summary judgment premature. 60 In contrast to Justice Ginsburg s opinion, Justice Breyer s concurrence identified that, notwithstanding evidence that 90 percent of the files were infringing, Grokster permitted transfer of about 10 percent of noninfringing files, a number similar to the 9 percent that the Court found authorized in Sony Corp. of America v. Universal City Studios, Inc., 61 the previous case where the Supreme Court had addressed this issue. 62 Drawing such an arbitrary line in the sand, Justice Breyer suggested, would create inconsistency among the courts and uncertainty for defendants. 63 Rather than require future defendants in a similar action to focus on some percentage of validity, Justice Breyer proposed two alternative courses of action: one against the end user and the other toward developing new technology to deter unlawful infringement. 64 The resulting effects may continue to encourage lawful copying through specific services such as itunes or other programs encompassing such downloading services like Walmart. com. 65 Perhaps with torrent technology s wider functionality in mind, Justice Breyer added this statement in a concluding paragraph about the success of digital online commerce: And more advanced types of non-music-oriented P2P networks have also started to develop, drawing in part on the lessons of Grokster. 66 THE EXTENT OF GROKSTER LIABILITY FOR BITTORRENT The Grokster opinion begs the question of whether the next generation peer-to-peer distributors, such as BitTorrent, face the same type of Grokster liability. 67 At least two commentators believe that the answer is no. 68 BitTorrent s business model and deliberate efforts to curb downloading of copyrighted torrents tend to support this conclusion. Liability against the distributor primarily depends on whether he or she actively seeks to advance the infringement. 69 Napster (and Grokster by implication) strived to allow amateur and unknown artists to share their music on this new medium, 70 but the widespread piracy facilitated by these programs created a staggering amount of copyright infringement, 71 rendering their legitimate use argument implausible. In comparison, BitTorrent has actively sought to stem the amount of pirated media available through its technology and search engines by removing links to such torrents. 72 Its relationships with various entertainment studios to distribute licensed entertainment content and its ability to track its clientele through the end user s IP address 73 also may preclude it from having the same purposeful, culpable expression and conduct that the Supreme Court found in Grokster s business model. 74 BitTorrent s efforts to promote legitimate electronic commerce and technological development seem to encompass the sort of innovative technology that the Grokster court encourages. In short, BitTorrent s business strategy and 10

6 May 2007 JOURNAL OF INTERNET LAW program attributes may free it from Grokster liability because they appear to address each of the infringement concerns that the Supreme Court in Grokster contemplated. If a court opts to follow Justice Ginsburg s concurrence and draw a line between infringing and noninfringing uses, it may still determine that BitTorrent has a greater percentage of valid uses than the mere 10 percent found in Grokster or Sony, given its various licensing agreements with media studios and software developers. 75 On this point, one may argue that broadcast television downloading and distribution qualifies as a substantial noninfringing use. For BitTorrent and other torrent technology programs, this issue ultimately represents a question of fact, requiring a similar analysis to that in Sony, because the ability to download a television show and watch it on a computer is likely the substantive equivalent of being able to timeshift a television program by recording it on a VCR. 76 A distributor or end user may also raise fair use as an affirmative defense to a charge of direct infringement similar to how this issue was raised in Napster. 77 In either case, the court would have to determine where broadcast television downloading falls within the fair use spectrum. ANALYSIS: FAIR USE AND THE DIGITAL TELEVISION DOWNLOAD Generally, consumers must purchase rights in the media in order to obtain a personal copy, such as in the case of movies or videos. Unique to television, however, consumers need not purchase these same rights in order to obtain a personal copy; innovations such as the VCR, DVR, or TIVO have given consumers the ability to temporarily retain these rights without additional remuneration to the network. Advertising revenue through product placement or commercial spots 78 generates income, particularly in the case of broadcast television, but in the case of cable, satellite or pay cable receives the benefit of a secondary income stream by charging its viewers. Assuming first that the copyright holder of the television show differs from the copyright holder of the commercials aired during the show and second that commercials are edited out of the downloaded program, the digital distribution of a broadcast television show creates a multitude of issues. 79 This part focuses on the fair use doctrine as it applies to those end users who download television shows. 80 THE FAIR USE ARGUMENT FOR DIGITAL TV SHOWS Congress has codified the fair use doctrine as an equitable rule of reason. 81 When applicable, the fair use statute requires a court to consider four factors: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. 82 In 1984, the Supreme Court addressed this doctrine in Sony Corp. of America v. Universal City Studios, Inc., 83 which involved the rights of copyright holders of television shows against then-novel technology, the VCR. 84 In Sony, the issue was whether a television viewer using a VCR to record shows broadcast over the public airwaves in the privacy of his home was a fair use of the copyrighted works under the Copyright Act. Although the Ninth and Seventh Circuits have analyzed the fair use argument for downloading music files, 85 the nature of digital television calls for an analysis similar to that employed in Sony. Accordingly, this part attempts to reconcile Sony s approach to each of the four factors with regard to the VCR with the modern way of obtaining television shows through torrent technology. Substantively, both the private recording with a VCR or private downloading would allow the end user to view the program in the privacy of his home. Two commentators have made divergent arguments concerning P2P television sharing and fair use. 86 This part takes a more nuanced position than either, arguing that the factors in digital television cases balance more in favor of fair use for the end user, but against fair use for the distributor whose purposes encompass commercial or profit-making motives (commercial distributors). By implication, noncommercial distributors, which would primarily include end users who are uploading by virtue of the torrent technology, would qualify under the fair use statute. 87 As a general matter, this section operates on the assumption that the home computer today can function in the same manner as, if not better than, a VCR did when Sony was decided in This assumption is, at the least, a reality to early-users on the technology bellcurve. For example, Hewlett-Packard (HP) offers a laptop that promises to record a television show every time it airs and even record two shows or series at the same time while also watching a previously recorded third show. 88 Trying to distinguish those end users who record on their personal computers by virtue of specific software from those who download the same file through torrent technology would produce incongruent and inconsistent results; hence, this article treats them the same. Purpose and Character of the Use The first factor in the fair use evaluation concerns the use of the original work. As identified in Napster, this factor focuses on whether the new work merely replaces the object 11

7 JOURNAL OF INTERNET LAW May 2007 of the original creation or instead adds a further purpose or different character. 89 It also requires the court to determine whether the allegedly infringing use is commercial or noncommercial. 90 There is no doubt that the court would find that the digital version of the show merely replaces the original broadcast version, and one only has to look at the HP advertisement described above to see the functional identity. Thus, whether downloading via a torrent infringes the rights of the copyright holder of the digitized show depends on whether the use is commercial or not. The analysis differs slightly for the end user and the distributor. As applied to the end user, the Sony court focused on the technology of the VCR, in that it permitted an end user to time-shift the original airing of the program for private use. 91 In identifying this key aspect, the court deduced that the end user s choice to watch a previously aired show must be characterized as a noncommercial nonprofit activity. 92 As a result, nobody today gives a second thought to the implications of recording a show on a personal VCR. Similarly, the private recording or downloading of a television show via torrent technology or otherwise should not differ in result. Had the end user recorded the show on his VCR, DVR, or other computer program, he would have had the same copyrighted program (perhaps with commercials, but this part assumes that question away). Whether the end user recorded the program himself or had a friend record the show for him and let him borrow the tape therefore is of no consequence: The program could have been seen regardless of the method employed to time-shift it. In other words, by downloading the file, the end user essentially uses torrent technology analogous to the Sony method of time-shifting the aired program. Distinguishing the two technologies would operate to elevate form over substance. Against the end user, the court would likely favor the end user rather than the copyright holder under this analysis. Whether this characterization also favors the distributor would depend on the court s evaluation of commercial use. Given that the Internet permits millions of users to consume and digest information online, 93 the court would first have to analyze whether the online distribution of broadcast television shows qualifies per se. 94 While the commercial distributor s best argument may be that he is simply time-shifting the program for others, the court may have difficulty aligning private home usage with the widespread nature of the Internet. 95 Further, the commercial distributor will have to address how his act would not violate the copyright holder s exclusive right to distribute the work. 96 Those end users who distribute by virtue of the tit-for-tat downloading process, however, may have a more compelling argument that they are not distributing in the same way as someone who initially posts and dispenses the original torrent. Thus, against the distributor, the court will likely favor the copyright holder on this factor. The Nature of the Copyrighted Work The second factor focuses on the nature of the copyrighted work; in this case, a broadcast television show. While the music copyright litigation found online distribution of music to be commercial in nature because end users would be get[ting] for free something they would ordinarily have to buy, 97 the nature of broadcast television differs because the end user would ordinarily be able to obtain the program for free by turning on the television. In Sony, the nature of television as something a viewer has been invited to witness in its entirety free of charge helped tip the balance in favor of fair use. 98 Because the nature of television has not substantively changed, a court should have little problem glossing over this factor. An end user should have little problem succeeding on this factor so long as he can prove that he would have been able to view the show otherwise. The product has not changed; rather, downloads of broadcast shows are merely delivered in a different medium. Sony s holding still applies to broadcast television shows obtained by the end user, and accordingly, the court should balance this factor in the end user s favor. Likewise, this factor would also favor both the commercial and noncommercial distributor s position for the same reasons. The copyright holder s argument on this factor strengthens, however, with regard to cable or premium channel shows because they are not free like broadcast television. In these cases, the end user or distributor must be able to show that he already paid for these services in order to be able to argue this factor successfully. The Portion Used in Relation to the Whole The third factor, dealing with the amount of the original work copied, may have different results depending on whether the entire broadcast show is available or just clips of it. The nature of television, however, permits the full copying of a copyrighted work. 99 Likely, then, it would not matter if the end user downloaded the entire broadcast of Katie Couric s first nightly news appearance or just one segment, to give an example. 100 Wholesale copying of broadcast television, as compared to wholesale copying of music 101 would probably favor fair use for both the end user and the commercial and noncommercial distributor. The Effect of Use Upon the Market The nature of television arguably makes this last factor the most important one in this fair use analysis. Regardless of how the court decides the first three factors, 12

8 May 2007 JOURNAL OF INTERNET LAW this factor weighs heavily in favor of fair use for the end user and heavily against fair use for the commercial distributor. The Sony court predicated its analysis of this factor on the effect of the intended use on the copyright holder s potential market, 102 that is, the economic consequences of copying. 103 If the intended use is for a commercial gain, the copyright holder is given a presumption in favor of present or future market harm. 104 If the intended use is for a noncommercial gain, the copyright holder must demonstrate by a preponderance of the evidence that some meaningful likelihood of future harm exists. 105 In other words, [f]air use, when properly applied, is limited to copying by others which does not materially impair the marketability of the work which is copied. 106 The End User s Effect on the Marketability of the Product For the end user arguing fair use, the burden is on the copyright holder to show that the end user s download will harm the marketability of the work. While the nature of music and economic sales data has allowed the copyright holder to make this showing quite easily in those litigations, 107 the nature of broadcast television makes it much more difficult. Three interconnected reasons arguably favor the end user s fair use argument. First, the ability to download and watch the show at the end user s convenience is the functional equivalent to recording the show on a VCR and watching it at a later time. As in Sony, the court accepted the district court s rejections of the copyright holder s arguments that the ability to time-shift a program by recording it on a VCR for later private use would adversely affect the copyright holder s market. 108 The same argument could be made successfully for those who time-shift by downloading, particularly if the end user can show that some copyright holders would find nothing objectionable about the practice. 109 Second, downloading necessarily increases the show s exposure, which would have a positive effect on the copyright holder s market, reflected by either an increase in market share or in DVD sales of the show. 110 This factor would balance in favor of the end user regardless of whether the copyright holder approved of the ability to download or not. 111 Regarding market share, the most recent example of this type of online exposure resulting in positive results for the copyright holder comes from the television show The Office. Early ratings for the show were iffy until it began to be offered via itunes; 112 the combination of this broader online campaign and subsequently moving The Office to Thursday nights appears to be positively correlated with the fact that The Office is the second highest rated show in the demographic. 113 While this particular example comes from a legitimate download, the increases in downloads of other shows through torrent technology may have the same effect, especially in context of niche markets, such as the international television market. 114 Regarding DVD sales, the copyright holder would have to show that post-broadcast DVD sales of the work are affected in order to succeed. Unlike music, where sales have been established for many years, sales of television shows on DVD are a relatively recent phenomenon that continues to increase. 115 With the networks offering the same product (the show) for sale on their site, the copyright holder also has to contend with the argument that its own individual sales through legitimate channels may be having the same effect on the market. 116 Finally, it would be difficult for the copyright holder to argue that personal downloading of broadcast television shows harms the potential marketability when the networks are simultaneously encouraging the end user to view the same product online, albeit on their own terms. To the extent that the copyright holder may argue that downloading threatens the viability of marketing the show on television, one commentator points out that an analogous argument was made for the digital video recorder and that advertising revenue still increased. 117 Thus, downloading by the end user has a more likely effect of increasing, not decreasing, the marketability of the work. The end user who distributes by virtue of the tit-for-tat process will be able to apply most, if not all, of these same arguments, particularly given the fact that the same process could occur, albeit slower, if one end user recorded the show on a VHS tape and subsequently mailed it to another end user. 118 The analysis for the end user may differ slightly for television shows on non-broadcast channels. Downloading necessarily circumvents the cable or premium channel s subscription revenue stream, whereas downloading a broadcast show without commercials only circumvents the broadcaster s revenue through commercial advertisement. 119 The marketability of the work could be negatively affected for both in that the networks may be less inclined to accept a copyright holder s offer for syndication; however, the increase in syndication viewership and DVD sales of television shows suggest the opposite result. 120 Distributors Effect on the Marketability of the Product Unlike end users, distributors create a separate marketability concern that may balance the fair use scale against them. Without dispute, the sale of advertising, particularly commercials, and product placement helps to subsidize the concept of free television. 121 The more popular the show, the more money the network can command from advertisers hoping to secure positive association and increased sales from its consumer base. 122 Likewise, the 13

9 JOURNAL OF INTERNET LAW May 2007 broadcast popularity of a show helps the copyright holder eventually market it for syndication, allowing them to collect from an indefinite profit stream. 123 While the value of a commercial advertisement has a somewhat limited shelf life, 124 the ability to control the means from which an end user can see the work undeniably effects how the copyright holder can gauge its relative market, such as through the Nielson Ratings System. In turn, this ability directly affects marketability of the product. Based on this part s assumption that the downloaded television show has the commercials edited out, the end user is essentially watching the copyrighted show without what makes the show free in the first place. In many ways, this downloaded version would be the functional equivalent of what the user would see if he were to purchase the DVD of the show. 125 Notwithstanding any product placement the copyright holder may have used in the show itself, the show s sponsors are necessarily deprived of the end market for which they had paid a premium to reach. Further, the broadcast network, either as licensee or copyright holder, is deprived of being able to gauge its audience base. Thus, torrent technology and other Web sites provide the end user with a choice from where to obtain the digital media, something that the end user would not be able to do otherwise because it would only have been available on that broadcast channel. 126 This conclusion would apply regardless of whether the distributor provided links to these torrents through its torrent search engine or if the files were posted directly on a third party Web site. 127 Unlike the end user whose broadcast viewing or digital download helps increase the show s exposure and marketability, the commercial distributor, for the aforementioned reasons, will be unlikely to rebut the presumption of present or future market harm. Additionally, the noncommercial distributor, such as a fan who posts the video on Web sites like YouTube, Neufstream.com, or Fanpop.com, faces the same infringement problems. In deciding how to pursue an infringement issue with fair use in mind, the copyright holder will have a slightly different litigation strategy than he would if he was protecting his music copyright. Against the end user, the fair use argument presents a formidable defense that may be difficult to overcome. Against the distributor, however, arguing fair use will likely end in the same judgment as it has in the music litigation cases. EVALUATION: PRACTICAL CONSIDERATIONS IN TELEVISION DOWNLOADING LITIGATION To curb piracy further and promote torrent technology s legitimate uses, the entertainment industry may find litigation necessary against other programs employing Cohen s torrent technology or otherwise distributing copyrighted works. Not surprisingly, this type of litigation has already begun. 128 Success will largely depend on the extent to which the service or distributor fosters infringement by providing access to copyrighted torrents. If charged with contributory or vicarious copyright infringement, these businesses may first have to explain the steps they have taken to discourage willful infringement, such as self-monitoring or removal of potentially infringing files or links to them following notice of infringement. 129 If they are unable to make this showing or otherwise refuse to comply with these types of notices, Grokster liability may apply and injunctive relief or damages may be available. In addition to these distributors, copyright holders may find additional claims to be had against end users who attempt to profit at the copyright holder s expense by downloading, saving, and then reselling the work on a bootleg DVD. 130 A search on ebay for any number of copyrighted shows on DVD may reveal deals that are, to put it colloquially, too good to be true when compared to the retail price. Concerted efforts by the copyright holder to determine whether the end user is profiting by distributing bootleg copies of a show as opposed to reselling a purchased copy may also have cost benefits that outweigh pursuit of end users that initially requires obtaining a subpoena to determine the identity of a John Doe end user. 131 Further, the actual damages based on that user s past sales records may exceed the statutory damages available in these cases. Although fair use may favor the end user for broadcast television shows, the shelf life of fair use is likely to be limited in time for the end user. Torrents for broadcast television shows that have since been cancelled or those of past seasons of current broadcast television shows may have more of an effect on marketability of the work than just downloading a current show one may have missed and otherwise not available on an official or licensed Web site. For shows with a continuing storyline, such as ABC s Lost, the argument for fair use for downloading the older shows would be that it increases viewership and exposure for the current show. The copyright holder, on the other hand, should be able to demonstrate more easily the harm that this form of downloading could bring if the show was to be taken to syndication. Considering that a legitimate alternative for catching up, so to speak, exists through the online purchase of the show through a service like itunes, framing this argument in terms of how the download affects these sales may tip the scale in favor of the copyright holder on any fair use argument raised. Litigation may not be the only solution to this problem. The copyright holder may wish to work with distributors like BitTorrent to funnel its online audience 14

10 May 2007 JOURNAL OF INTERNET LAW base in such a manner that it is able to gauge use online. This ability to track its user s online habits, much like Amazon tracks its customer s purchasing habits, 132 would produce more effective advertising results. As the ability to gauge its users viewing and purchase habits continues to develop, the copyright holder should be able to extrapolate more specific data on its customer base, which would, in turn, attract future advertisers catering to those markets. Others have commented on the economics of this type of focused advertising in the online world and its effects on the current television advertising model. 133 Having multiple outlets for distributing the work may give the copyright holder a more representative understanding of its demographics and help increase the marketability of the work. Further, a rational consumer would view or purchase content through a legitimate source rather than attempt to obtain the show through illegal channels. 134 Anticipating that some level of piracy will always occur, the copyright holder may wish to increase product placement in the show itself. This form of advertising is undoubtedly a double-edged sword with its consumers, 135 but the results often speak for themselves. 136 As online viewership continues to grow, copyright holders will invariably increase product placement as a secondary revenue stream. The ability to market the show more effectively to these consumers will benefit both the copyright holder and the show s sponsors. The copyright holder of a television show needs to consider the effect of suing its core constituency. As Justice Breyer suggests in his concurring opinion in Grokster, this legal option is a viable alternative to developing more technological remedies that work to deter infringement at the first instance. 137 The Recording Industry Association of America (RIAA) and the Motion Picture Association of America (MPAA) have both been successful in their lawsuits against end users infringing on their products. 138 As pointed out by one commentator, the results of these actions have been mixed. 139 In order to better serve its customer base and allocate costs more productively, the television show copyright holder may wish to forgo certain litigation against end users and instead concentrate on developing relationships with certain commercial distributors to drive their end users toward a legitimate download. CONCLUSION The downloading of television shows, while perhaps in its infancy, is on an upward trend. To prevent the corresponding level of piracy experienced by the music industry, the copyright holders of television shows, and as specifically explained in this article, the copyright holders of broadcast television shows, need to develop a strategy to control how its consumer base views its programming. The diversity of torrent technology programs that allow an end user to obtain the digital version of the television file, however, intrudes on the copyright holder s exclusive right to distribution. It may be in the copyright holder s financial interest to pursue a litigation strategy to deter these programs from distributing the file or the end user from downloading them. In the case of the former, the copyright holder has the Grokster opinion in his arsenal to recover on various infringement claims. These technology programs, however, may employ strategies that put Grokster liability beyond the copyright holder s reach. Against the distributor, and also against the latter end user, the litigation will likely require the court to make a fair use analysis. In certain cases, the end user may prevail in a fair use argument based on the reasoning of Sony. In others, the copyright holder will be successful. Regardless, the copyright holder may have a competing interest to work with the distributor in order to better serve the consumer base. Fostering these relationships, in the same vein that the torrent technology programs have succeeded in developing legitimate and successful strategic partnerships, may have a better overall result for these particular copyright holders and their sponsors. In short, the potential for the copyright holder to use torrent technology necessitates a consideration of the value added benefit that could have consumers beating a path toward the copyright holder and its sponsors. NOTES 1. Jack Hope, A Better Mousetrap, American Heritage, Oct. 1996, at Id. 3. See, e.g., Saul Hansell, New Service from Amazon Offers Downloadable Films, NY Times, Sept. 8, 2006, at C2 (reporting that Amazon.com has available for purchase a line of digital products, including television shows and movies, to compete with similar digital media available from competing distributors such as Apple s itunes). See also Ben Hirschler, Gates: Internet to Revolutionize TV in 5 Years, Reuters, Jan. 27, 2007, available at (predicting that the convergence of television and the Internet is inevitable and using the Olympics as an example of when the current television schematic has come up short). 4. For an excellent chronological summary and analysis of how users shared files or obtained files online and the legal implications, see Craig A. Grossman, From Sony to Grokster, The Failure of the Copyright Doctrines of Contributory Infringement and Vicarious Liability to Resolve the War Between Content and Destructive Technologies, 53 Buff. L. Rev.141 (2005). 5. Dawn C. Chmielewski & Meg James, TV May Be Free but Not That Free, L.A. Times, Mar. 1, 2006, at A1. 6. Tom Zeller, Jr., Federal Effort to Head Off TV Piracy is Challenged, NY Times, Feb. 21, 2005, at C1. 7. itunes Store: Download times for purchases (Sept. 13, 2006), info.apple.com/article.html?artnum= This comparison, of course, may be comparing oranges to apples due to the differing downloading technology and availability of files. 8. See generally David Bauder, TV Shows Online Increasing, Pittsburgh Post-Gazette, Oct. 25, 2006, at C6 (stating that ABC, CBS, NBC, and 15

11 JOURNAL OF INTERNET LAW May 2007 FOX are all beginning to experiment with putting their popular shows online through streaming or real time video, with undisclosed success). See also Joshua Chaffin & Aline van Duyn, Viacom Tells YouTube to Remove Content, FT.com, Feb. 2, 2007, at 3, available at ft.com/cms/s/0e225e60-b2d6-11db-99ca e2340.html (reporting that Viacom has demanded Google s YouTube service to remove more than 100,000 video clips after licensing negotiations fell through). 9. See Howard W. French, Chinese Tech Buffs Slake Thirst for U.S. TV Shows, NY Times, Aug. 9, 2006, at A6 (reporting that increasing numbers of Chinese Internet users are downloading American television shows, complete with subtitles supplied by teams of volunteers ). See also Chmielewski & James, supra n.5, at A1 (explaining that British downloaders no longer need to wait nine months to see current American shows); Lara Sinclair, Free-to-Air Copping A Download, Australian IT, Dec. 14, 2006, 0,7204, %5e16123%5e%5enbv%5e,00.html (reporting the results of a University of Sydney student s study that 53 percent of his 800 respondents regularly download television shows from the Internet). 10. In this article, broadcast television shows refers to shows airing on network television channels, such as CBS, ABC, NBC, FOX, PBS, or the CW, which one could watch with just a television set and antenna. 11. Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.,125 S. Ct (2005). 12. This article refers to end users as the consumers who download the file using various downloading technologies. While this article refers to end users with masculine pronouns, there is no implication that males or females would download television any differently, other than perhaps in the types of shows downloaded. 13. Constance E. Bagley & Reed Martin, BitTorrent: Copyrights in Cyberspace 7-8 (Harv. Bus. School Online, Sept. 22, 2006). 14. See, e.g., Chmielewski & James, supra n.5, at A1 (explaining how some people are using modern file sharing programs to create personal ondemand programming). One British downloader reasoned, If it is free on everybody s TV, why worry about it? Id. 15. Much has been already written on the technology behind Napster and its derivative programs. See Grossman, supra n.4, at See also A&M Records Inc. v. Napster, Inc., 239 F.3d 1004, (9th Cir. 2001) (describing Napster s functionality). 16. Heather S. Hall, The Day the Music Died: The Supreme Court s Reversal of MGM Studios, Inc. v. Grokster and its Impact on Secondary Liability for Copyright, 35 J.L. & Educ. 387, 387 n.1 (2006). 17. Napster, 239 F.3d at The Napster case provides a succinct explanation of how Napster provided search and downloading capability between its users. 18. See Napster, 239 F.3d at 1022 ( The record supports the district court s finding that Napster has actual knowledge that specific infringing material is available using its system, that it could block access to the system by suppliers of the infringing material, and that it failed to remove the material. ). Several commentators have discussed Napster s business model and provide better explanations as to how it created liability for the indirect copyright infringement claims plaintiffs brought against the company. See, e.g., Grossman, supra n.4, at (discussing the knowledge element); John M. Moye, Comment, How Sony Survived: Peer-to-Peer Software, Grokster, and Contributory Copyright Liability in the Twenty-First Century, 84 N.C. L. Rev. 646, (2006) (summarizing the Napster case). 19. See Bryan H. Choi, Note, The Grokster Dead-End, 19 Harv. J.L. & Tech. 393, (2006) (contrasting the Aimster and Grokster programs that gained popularity after Napster and explaining how they exploited the legal loopholes in the knowledge element that the Napster decision had seemingly created). 20. Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 125 S. Ct. 2764, 2771 (2005). 21. Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 380 F.3d 1154, (9th Cir. 2004), vacated, 125 S. Ct (2005). 22. See Bagley & Martin, supra n.13, at 2 (describing Cohen s technological innovation and how its open source code prompted further technological innovation). See generally Bram Cohen, Incentives Build Robustness in BitTorrent(2003), pdf (describing how BitTorrent works). Because BitTorrent is a brand name, this article will distinguish BitTorrent and the generic torrent technology when appropriate. 23. Wikipedia, BitTorrent, (last visited Apr. 18, 2007). 24. See Cohen, supra n.22, at 2; Choi, supra n.19, at See Choi, supra n.19, at See Cohen, supra n.22, at 2-3 (explaining the technical aspect to this process). See also Wikipedia, BitTorrent, supra n.23 (providing a more general explanation). 27. See Cohen, supra n.22, at 3-5 (explaining the tit-for-tat process). See also Julie Bosman & Tom Zeller, Jr., Warner Bros. to Sell Movies Using the Software of Pirates, NY Times, May 9, 2006, at C3 ( [E]veryone downloading a file is simultaneously contributing to its distribution, making it impossible to leech, or take without also giving. ). 28. Id. 29. Clive Thompson, The BitTorrent Effect, Wired, Jan. 2005, at 21, available at 30. See David W. Opderbeck, Peer-to-Peer Networks, Technological Evolution, and Intellectual Property Reverse Private Attorney General Litigation, 20 Berkeley Tech. L.J. 1685, 1697 (2005). 31. See Cohen, supra n.22, at Id. at 2-5; Bagley & Martin, supra n.13, at Brad Stone, Wal-Mart Plans to Test Online Films, NY Times, Nov. 26, 2006, at C Bagley & Martin, supra n.13, at 2 (using Sun Microsystems as an example). See also Stone, supra n.33, at C1 (stating that BitTorrent planned to announce that it has struck distribution deals with eight media partners, including 20th Century Fox, Paramount and MTV Networks ). 35. Julie Bosman & Tom Zeller, Jr., Warner Bros. to Sell Movies Using the Software of Pirates, NY Times, May 9, 2006, at C3. See also Stone, supra n.34, at C1 (reiterating the BitTorrent pledge to police its network for illegal trading ). 36. Dawn C. Chmielewski, BitTorrent Set To Unveil Deals With Studios, L.A. Times, Nov. 29, 2006, at C See, e.g., Julie E. Cohen, Pervasively Distributed Copyright Enforcement, 95 Geo. L.J. 1, 9 (2006) (arguing that Grokster has effectively eroded the certainty afforded by the Sony safe harbor ); Alfred C. Yen, Third-Party Copyright Liability After Grokster, 91 Minn. L. Rev. 184, 189 (2006) (analyzing Grokster and arguing that it created an improved framework for future construction of third-party copyright liability ); Tiffany A. Parcher, Comment, The Fact and Fiction of Grokster and Sony : Using Factual Comparisons to Uncover the Legal Rule, 54 UCLA L. Rev. 509 (2006) (making factual comparisons between the Sony and Grokster cases). 38. Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 259 F. Supp. 2d 1029, 1031 (C.D. Cal. 2003), aff d, 380 F.3d 1154 (9th Cir. 2004), vacated, 125 S. Ct (2005). Although there were three distributor defendants in this case, this article refers to them collectively as Grokster. 39. Id. at Id. at 1035, Id. at Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 380 F.3d 1154, 1160 (9th Cir. 2004), vacated, 125 S. Ct (2005). 43. Id. at In making this conclusory statement, the District Court and Ninth Circuit primarily relied on undisputed evidence in the form of declarations asserting the program provided movie trailer downloads, public domain materials, free songs or other noncopyrighted works, among others. SeeGrokster, 259 F. Supp. 2d at Grokster, 380 F.3d at Id. at See In re Aimster Copyright Litig., 334 F.3d 643, 650 (7th Cir. 2003). 47. See Brandon Michael Francavillo, Comment, Pretzel Logic: The Ninth Circuit s Approach to Contributory Copyright Infringement Mandates that the Supreme Court Revisit Sony, 53 Cath. U. L. Rev. 855 (2004) (discussing the split created by both cases). 48. Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 543 U.S (2004). 16

12 May 2007 JOURNAL OF INTERNET LAW 49. Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 125 S. Ct. 2764, 2776 (2005). 50. Id. (citations omitted). 51. The actual or constructive knowledge-plus test is equivalent to what Professor Yen describes as a fault test. See Yen, supra n.37, at Grokster, 125 S. Ct. at 2777 (citations omitted). 53. Id. at Id. at Id. 56. See id. at 2772, Id. at This would imply that the court found Grokster had knowledge of the illicit uses of its program and, by negative inference, did nothing to curb or discourage it. 58. Grokster, 125 S. Ct. at Id. at 2783 (Ginsburg, J., concurring). 60. Id. at Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984). 62. Grokster, 125 S. Ct. at (Breyer, J., concurring). 63. See id. at 2783 ( The additional risk and uncertainty would mean a consequent additional chill of technological development. ). 64. Id. at See id. at Id. at For a well-articulated argument on why contributory liability after Grokster will become the backbone of the law, see Yen, supra n.37, at See Choi, supra n.19, at ; Moye, supra n.18, at (calling it a Pyrrhic victory for the entertainment industry and analyzing the need for Congressional involvement). 69. Grokster, 125 S. Ct. at 2787 (Breyer, J., concurring); accord id. at Bagley & Martin, supra n.13, at 7 (quoting Napster interim CEO Eileen Richardson in a 2000 conversation with an RIAA representative). 71. Grokster, 125 S. Ct. at See supra n.35 and accompanying text; see also Dawn C. Chmielewski, BitTorrent Set to Unveil Deals with Studios, L.A. Times, Nov. 29, 2006, at C2, available at ( BitTorrent has agreed to filtering techniques that will enable the pirated content to stay out of the network and only allow copyrighted material from Paramount to get to consumers who are willing to pay for it. ) (quoting Thomas E. Lesinski, president of digital entertainment for Paramount Pictures). 73. John Borland, P2P Hide-and-Seek, CNET News.com, July 23, 2003, 3, (quoting BitTorrent s founder as saying that BitTorrent does not have any anonymity features). 74. Grokster, 125 S. Ct. at See Greg Sandoval, Paramount, Fox embrace BitTorrent, CNET News. com, Nov. 29, 2006, at 8, html (quoting BitTorrent s general manager of consumer services as stating that BitTorrent s research suggests that thirty percent of its users will use the service legally by paying for content). See also Ben Fritz, BitTorrent Goes Legit, Variety, Feb. 25, 2007, available at article/vr html?categoryid=18 (reporting that BitTorrent has formally launched its digital content store, which combines its peer-topeer protocol with the ability to obtain licensed media). 76. Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, (1984). 77. A&M Records Inc. v. Napster, Inc., 239 F.3d 1004, (9th Cir. 2001). 78. The Superbowl commercials provide the best known example of this point. See Stuart Elliott, Multiplying the Payoffs From a Super Bowl Spot, NY Times, Jan. 26, 2007, at C2 (stating that a thirty-second spot in Superbowl XLI costs an average of $2.6 million). 79. The effects of commercials on the original broadcast and the ability to edit them out of the digital version create an additional layer of concern for the copyright holder that is beyond this article. One commentator has already addressed this issue in depth. See Ethan O. Notkin, Note, Television Remixed: The Controversy Over Commercial-Skipping, 16 Fordham Intell. Prop. Media & Ent. L.J. 899 (2006). For purposes of this article, assuming the copyright owner s work is the show itself and not the show with commercials is more realistic than trying to carve out some complex scenario where the digital version of the latter is okay whereas the digital version of the former is not. Compare id. at 903 ( [T]hose seeking to prevent commercial-skipping are hard-pressed to come up with any reasonable form of enforcement. ) within re Aimster Copyright Litig., 334 F.3d 643, (7th Cir. 2003) ( [C]ommercial-skipping, amounted to creating an unauthorized derivative work,... namely, a commercial-free copy that would reduce the copyright owner s income from his original program, since free television programs are financed by the purchase of commercials by advertisers. ) (citations omitted). 80. The ability to archive files on one s computer or on DVD indefinitely and the economic implications on the copyright holder creates another substantive issue beyond the scope of this article. Commentators have begun to address this concern in the context of Google s plan to create a massive digital library. See Rebecca Tushnet, My Library: Copyright and the Role of Institutions in a Peer-to-Peer World, 53 UCLA L. Rev. 977 (2006). One may argue, for example, that the end user who saves the file will be less likely to purchase the DVD version, this act may have a more adverse affect the work s marketability. This article does not reach this issue because it assumes that the end user deletes it from his computer after downloading the file and watching it. 81. Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 448 (1984) (citation omitted) U.S.C. 107 (2000). 83. Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984). 84. The Grokster court focused on Sony s substantial noninfringing uses language. Id. at 442 ( Accordingly, the sale of copying equipment... does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses. ). Grokster s program, as one that fostered infringement, could not therefore escape liability if cause[d] and profit[ed] from third-party acts of copyright infringement. Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 125 S. Ct. 2764, 2782 (2005). Because Grokster conceded that its users directly infringed on the copyrights being passed through its program, id. at 2772, the court in Grokster did not have the issue of fair use before it. 85. See A&M Records Inc. v. Napster, Inc., 239 F.3d 1004, (9th Cir. 2001) (affirming the district court s finding that Napster s users were not fair users of copyrighted music); BMG Music v. Gonzalez, 430 F.3d 888, 890 (7th Cir. 2005) (reaching a similar conclusion with less analysis). 86. See Maria Termini, Note, Time-Shifting in the Internet Age: Peer-to- Peer Sharing of Television Content, 38 Colum. J.L. & Soc. Probs. 415, (2005) (finding no fair use); Sheila Zoe Lofgren Collins, Note, Sharing Television Through the Internet: Why the Courts Should Find Fair Use and Why It May be a Moot Point, 7 Tex. Rev. Ent. & Sports L. 79 (2006) (finding fair use). Ms. Collins s note makes a slight variation on a point that I argue here by stating that the entire downloading issue becomes moot if downloading is fair use and uploading is found to be illegal. See id. at 97 n.122. Although I agree with many of Ms. Collins s points, I have attempted to structure this part to address what she terms the tenuous aspects of the television downloading debate, that is, fair use as it applies to distributors. See id. at 103. As a result, this part reaches a slightly different conclusion than does Ms. Collins in her analysis. Cf. at 100 ( Uploading a television program only allows downloaders to watch what they would already be allowed to watch for free on broadcast television. Put simply, uploading should be legal. ). 87. An open question would be whether distributors who post television shows on Web sites like YouTube would fall in the commercial or noncommercial category. See Fox Subpoenas YouTube after 24 Episodes Posted, Reuters, Jan. 25, 2007, available at ; Nicholas Carlson, Google Turns Over User IDs, Internetnews.com, Feb. 12, 2007, php/ YouTube, however, has announced plans that it may share advertising revenue with users who own the full copyright to popular videos. See Tim Weber, YouTubers to Get Ad Money Share, BBC News, Jan. 27, 2007, available at Whether a distributor who would otherwise receive no commercial benefit from this type of distribution would fall into the commercial category 17

13 JOURNAL OF INTERNET LAW May 2007 remains unclear, although the analysis in this article suggests that the effect on the work s marketability may outweigh this factor. 88. See HP Entertainment Notebook PC, cache/ html (last visited Apr. 18, 2007). 89. Napster, 239 F.3d at See also Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994) (finding that this factor requires looking at the extent to which the original work is transformative ). 90. Napster, 239 F.3d at 1015; Campbell, 510 U.S. at Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 449 (1984). 92. Id. at See Lee Rainie & John Horrigan, A Decade of Adoption: How the Internet Has Woven Itself into American Life, Pew Internet & Am.Life Project, Trends 2005, 58 (2005), available at pdfs/internet_status_2005.pdf (estimating that in this country alone, 128 million use the Internet, and on any given day,70 million can be found participating in online activities). 94. See Napster, 239 F.3d at 1015 (finding repeated and exploitative copying of copyrighted works, even if the copies are not offered for sale to be a commercial use). 95. See generally Reno v. ACLU, 521 U.S. 844, 870 (1997) (stating that for First Amendment purposes, the ability to communicate over the Internet allows any person with a phone line... [to] become a town crier with a voice that resonates farther than it could from any soapbox ). 96. See 17 U.S.C. 107(1), (3), (5) (2000); Napster, 239 F.3d at 1014 ( Napster users who upload file names to the search index for others to copy violate plaintiffs distribution rights. ). 97. Napster, 239 F.3d at 1015 (citation omitted). 98. Sony, 464 U.S. at Id. at (acknowledging that fair use regarding the time-shifting aspect of recording a work broadcast in its entirety invites the end user to record the entire work) See Katie Couric Weighs Anchor, CBS News, Sept. 5, 2006, cbsnews.com/stories/2006/09/05/eveningnews/main shtml. Clips of this first broadcast can be found on YouTube. See Katie Couric s First Broadcast, YouTube, (last visited Apr. 18, 2007). See also Sony, 464 U.S. at 455 n.40 ( Copying a news broadcast may have a stronger claim to fair use than copying a motion picture. ). Cf. Scott Kirsner, Academy Threatens YouTube, Variety, Feb. 27, 2007, available at html?categoryid=13&cs=1 (reporting that the Academy of Motion Picture Arts & Sciences has requested that YouTube remove various clips from the 2007 broadcast of the Academy Awards) See Napster, 239 F.3d at Sony, 464 U.S. at Id. at 455 n Id. at Id Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, (1985) See, e.g., BMG Music v. Gonzalez, 430 F.3d 888, 890 (7th Cir. 2005) ( As file sharing has increased over the last four years, the sales of recorded music have dropped by approximately 30%. Perhaps other economic factors contributed, but the events are likely related. ) Sony, 464 U.S. at Cf. id. at 446 (finding that the record makes it perfectly clear that there are many important producers of national and local television programs who find nothing objectionable about the enlargement in the size of the television audience that results from the practice of time-shifting for private home use ) Collins, supra n.86, at The unauthorized downloading would require a similar analysis to that of unauthorized time-shifting in Sony. See Sony, 464 U.S. at See Dave Walker, I Want My itv, New Orleans Times Picayune, Feb. 19, 2006, at Bill Carter, NBC President Says Ratings Are Gaining Momentum, NY Times, Jan. 18, 2007, at E See generally Chmielewski & James, supra n.5, at A1 (stating that illegal downloads of the show 24 have increased by more than 150% in the past year in Britain) See Marc Gunther, Fox the Day After Tomorrow, Fortune, May 29, 2006, at 98, available at fortune_archive/2006/05/29/ /index.htm ( Annual sales of TV shows on DVD have grown from just about zero in 1999 to nearly $4 billion in ). This point concedes, however, that the sale of television shows on VHS tapes are nothing new and the copyright holder may have data to compare the same VHS sales to DVD sales, which may yield a different conclusion than asserted here See David Bauder, TV Shows Online Increasing, Pittsburgh Post-Gazette, Oct. 25, 2006, at C6 (describing how ABC and other networks sell their shows through itunes); Meg James, CBS Cuts Out Download Middleman, L.A. Times, Feb. 2, 2006, at 1 (describing how CBS sells some of its episodes on its own network) See Notkin, supra n.79, at 907 (providing data) See Termini, supra n.86, at 438 (giving this example) Id. at See Collins, supra n.86, at 89; Gunther, supra n.116, at See Notkin, supra n.79, at See Robert L. Saltzman, Television News Access to Exclusively Owned Sporting Events: A Comparative Study, 7 Sports Law J. 1, 2 (2000) See Naomi Mezey & Mark C. Niles, Screening the Law: Ideology and Law in American Popular Culture, 28 Colum. J.L. & Arts 91, 175 (2005). See also Eleanor Sasis, Prime Time Anytime: Wireless Video on Demand, Ent. & Sports Law., Winter 2006, at 34: Traditionally, a show produced for a primetime network is sold to a network at a given license fee. The license fee is typically less than what it costs to produce the show. If the show produces good ratings for the network, the production company can make the money back by (1) negotiating for a higher license fee after the first deal ends, (2) selling the episodes of the show on syndication and (3) selling the show on DVD. (citation omitted) 124. See Termini, supra n.86, at ( Advertisers probably are not very concerned when home viewers skip commercials that are ten, two, or even one year old. ) Id. at 437 (discussing the extra features that commercially produced DVDs of television content may include). Although a counterargument may be made that the end user does not have to watch the commercials in the first place, and can edit them out or have the technology, such as a DVR edit them out for the end user, this argument precludes the fact that the end user has a choice to watch the commercial. In Sony, for example, the Court reiterated the district court s findings that 92% of end users recorded commercials and only 25 percent fast-forwarded through them. Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 453 n.36 (1984). See also Termini, supra n.86, at (emphasizing this point) Cf. Collins, supra n.86, at 87 (arguing that uploading has no negative effect on the copyright holder s potential market because downloading users would be able to watch the program on their television sets for free anyway ) with BMG Music v. Gonzalez, 430 F.3d 888, 891 (7th Cir. 2005) ( Downloads from peer-to-peer networks such as KaZaA compete with licensed broadcasts and hence undermine the income available to authors. ) The ability for the distributor to generate his own advertising revenue through various banner advertisements or sponsored links also demonstrates a commercial benefit gained at the copyright holder s expense See, e.g., Caroline McCarthy, File-sharing Site edonkey Kicks It, CNET News.com, Sept. 13, 2006, (reporting settlement of a copyright case against the P2P client edonkey) See YouTube Deletes 30,000 Files After a Copyright Complaint, NY Times, Oct. 21, 2006, at C See Mark Brown, Music Pirates Find a Haven in ebay Sales, Denver Rocky Mountain News (CO), May 28, 2005, at 3D (providing examples of unreleased or music concerts that are available through ebay in pirated form). But see Dan Leroy, If It s Live, It s Probably Already Online, NY Times, Sept. 12, 2004, at 14CN (reporting that bootlegs of live concerts and rare recordings often show up on ebay without fear of litigation because the record companies do not own the copyrights to concert performances ). Unlike the non-involvement of the record companies in preventing the types of bootlegging Leroy reports, preventing bootlegging 18

14 May 2007 JOURNAL OF INTERNET LAW of television shows likely is in the copyright holder s financial interest because it would necessarily reduce legitimate DVD sales In many of the reported cases against end users, the first step taken by the copyright holder is to identify the infringer based on the infringer s IP address, which requires first serving the ISP or Web site with a subpoena for the infringer s true identity based on the IP address. See, e.g., Paramount Pictures Corp. v. Davis, 234 F.R.D. 102, (E.D. Pa. 2005) (explaining how this process was used to uncover the identity of a user who was the first propagator of a pirated movie) See generally Monty Phan, The Personal Pitch: Online Retailers Seek to Trace the Tastes of Their Customers nd Often Strike Out Miserably, Kansas City Star (MO), June 12, 2005, at I16 (explaining how various online retailers are beginning to apply past purchases to make recommendations, but the various technologies still produce imperfect results) See Notkin, supra n.79, at (suggesting that the current scheme of television commercials is highly ineffective); id. at 935 (suggesting an ad system like Google s Adword program); Randal C. Picker, The Digital Video Recorder: Unbundling Advertising and Content, 71 U. Chi. L. Rev. 205, (2004) (suggesting that advertising personalization would produce more effective results, but alluding to the privacy issues it creates) See Collins, supra n.86, at 101. As Ms. Collins points out, the rational consumer has emerged in the context of online music purchases: Generally people seem to be more willing to pay the 99 cents and spend 5 minutes getting the song than to pay nothing and spend an hour or more trying to get a useable version. Id. at See Nokin, supra n.79, at 934 (suggesting that there are debates about whether certain programs become marketing vehicles or infomercials instead of real story-driven programs ). See generally Amit M. Schejter, Art Thou For Us, Or For Our Adversaries? Communicative Action and the Regulation of Product Placement: A Comparative Study and a Tool for Analysis, 15 Tul. J. Int l & Comp. L. 89 (2006) (comparing the effects of product placement regulation in five countries with regard to free and commercial speech) See Phil Rosenthal, Office Makes Pitch to Viewers: Watch and Buy, Chi. Tribune, Dec. 10, 2006, at B3, available at com/news/columnists/chi dec10,1, column (giving an example of product placement for a shredder that resulted in one of that week s top placements, according to itvx, a tracking outfit ) Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 125 S. Ct. 2764, (2005) (Breyer, J., concurring) See Justin Hughes, On the Logic of Suing One s Customers and the Dilemma of Infringement-Based Business Models, 22 Cardozo Arts & Ent. L.J. 725, (2005) Id. at 765. Professor Hughes implies that the financial gains recovered by the plaintiffs in these cases compared to the decrease in illegal downloading could cause the litigations to become a profit source for the RIAA rather than be used as a stick to deter further infringement. See id. at

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